The stock of Nogro Corporation is currently selling for $14 per share. Earnings per share in the coming ye to be $2.80. The company has a policy of paying out 50% of its earnings each year in dividends. The rest. invested in projects that earn a 20% rate of return per year. This situation is expected to continue indefinit Required: a. Assuming the current market price of the stock reflects its intrinsic value as computed using the consta what rate of return do Nogro's investors require? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing reinvested? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? Note: Round your answer to 2 decimal places.

The stock of Nogro Corporation is currently selling for $14 per share. Earnings per share in the coming ye to be $2.80. The company has a policy of paying out 50% of its earnings each year in dividends. The rest. invested in projects that earn a 20% rate of return per year. This situation is expected to continue indefinit Required: a. Assuming the current market price of the stock reflects its intrinsic value as computed using the consta what rate of return do Nogro's investors require? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b. By how much does its value exceed what it would be if all earnings were paid as dividends and nothing reinvested? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. c. If Nogro were to cut its dividend payout ratio to 25%, what would happen to its stock price? Note: Round your answer to 2 decimal places.

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Description: None The stock of Nogro Corporation is currently selling for $14 per share. Earnings per share in the coming year are expectedto be $2.80. The company has a policy of paying out 50% of its earnings each year in dividends. The rest is retained andinve

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter7: Common Stock: Characteristics, Valuation, And Issuance

Section: Chapter Questions

Problem 3P

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